Effective Leadership in a Downturn: The Leadership Code

By: Norm Smallwood, Dave Ulrich, Kate Sweetman

What kind of leadership do you need for a downturn?  Strong, balanced and complete.  When times get tough, leaders often make the mistake of focusing only on one thing: the immediate bottom line.  Great leaders, however, continue to operate in the long term as well as the short term, and maintain focus on people as well as on results.  Leaders who understand this will help their organization succeed in the short term and position it for the recovery.

The study of leadership has become far too complex and confusing.  If you search Google for the word leader, you get more than 300 million hits.   To counteract any confusion, we have defined a succinct set of principles that we call the Leadership Code.   Not just another leadership model, the Leadership Code is a synthesis of the rules and principles for any leader.  When the principles of the Leadership Code are embedded in an organization, they will improve the performance of leaders and the organization, in downturns as well as upturns.

How Did We Find the Leadership Code?

The questions we investigated were:

1. What percent of effective leadership is basically the same?
2. Are there some common rules that successful leaders must master?
3. If so, what are they?

Based on our research, we concluded that 60-70% of leadership effectiveness would be contained in a Leadership Code, if we could crack it.  After synthesizing the data, we generated a five-part Leadership Code.

Leadership Code

In an effort to help visualize this model, we have mapped out two dimensions (Time and Focus) and anchored it with what we are calling Personal Proficiency.  This model captures the five rules of leadership that can be readily applied to leaders who are coping with the challenges of an economic downturn.

Rule 1: Shape the future. Strategists answer the question, “Where are we going?” and make sure that those around them understand the direction as well.  They not only envision the future, but also help to create it. They figure out where the organization needs to go to succeed, test these ideas pragmatically against current resources (money, people, organizational capabilities) and work with others to figure out how to get there. In tough economic times, Strategists set priorities and make sure that the organization allocates the right attention to the right things.

Rule 2: Make things happen. The Executor dimension of the leader focuses on the question, “How will we make sure we get to where we are going?”   Executors translate strategy into action. They understand how to make change happen, assign accountability, make key decisions and delegate them to others, and ensure that teams work well together. Executors also put the systems in place for others to make change happen.  In tough economic times, these leaders focus even more on getting things done.  They reduce risks by making decisions quickly and aggressively.

Rule 3: Engage today’s talent. Talent Managers answer the question, “Who goes with us on our business journey?”  They know how to identify, build and engage talent to generate immediate results.  Talent Managers identify what skills are required, draw talent to their organizations, engage them, communicate extensively and ensure that employees turn in their best efforts. These leaders generate intense personal, professional and organizational loyalty.  In tough economic times, Talent Managers make hard people choices.  They use economic demands as a license to remove poor performers, demand productivity, and to focus their communications to remaining employees.

Rule 4: Build the next generation. Human Capital Developers answer the question, “Who stays and sustains the organization for the next generation?”  While Talent Managers ensure shorter-term results through people, Human Capital Developers ensure that the organization has the longer-term competencies for future strategic success.  Just as good parents invest in helping their children succeed, Human Capital Developers help future leaders be successful.  These leaders build a workforce plan that focuses on future talent while understanding how to develop that talent. They also help employees envision their future within the company. While hard economic times may tempt leaders to delay investing in the future, Human Capital Developers seize the opportunity to secure new talent who was previously out of reach.

Rule 5: Invest in yourself. At the heart of the Leadership Code – literally and figuratively – is Personal Proficiency.  Effective leaders cannot be reduced to what they know and do.  Who they are as human beings has everything to do with how much they can accomplish with and through other people.   Leaders are voracious learners. They learn from success, failure, assignments, books, classes, people, and life itself.  Passionate about their beliefs and interests, they expend an enormous personal energy and attention on whatever matters to them.  Effective leaders inspire loyalty and good will in others because they themselves act with integrity and trust.  In tough economic times, these leaders are calm in crisis, confident in uncertainty, and grounded in fundamental principles and values, rather than relying on quick fixes.

We have found that these five rules form the basis of great leadership.  Whether the economy moves down or up, the Leadership Code can be adapted to consistently build leadership success.

Dave Ulrich, Norm Smallwood and Kate Sweetman are authors of the newly released book, The Leadership Code: Five Rules to Lead By.